Calculate the payback period and discounted payback period f

Calculate the payback period and discounted payback period for following After Tax Cash Flow, assuming minimum discount rate of 8%. Please show your work and include all the required equations.

Year	0	1	2	3	4	5	6	7	8
ATCF	-5,000	-4,000	2,000	2,000	1,800	1,800	1,800	1,600	1,600

Solution

Req 1. Year Cash flows Cumulative Cf 0 -5000 -5000 1 -4000 -9000 2 2000 -7000 3 2000 -5000 4 1800 -3200 5 1800 -1400 6 1800 400 7 1600 2000 8 1600 3600 Payback period: 5 years + 1400 /1800 = 5.78 years Req 2 Year Cash flows PVf @ 8% Present Value Cumulative CF 0 -5000 1 -5000 -5000 1 -4000 0.925926 -3703.7 -8703.7 2 2000 0.857339 1714.678 -6989.03 3 2000 0.793832 1587.664 -5401.36 4 1800 0.73503 1323.054 -4078.31 5 1800 0.680583 1225.05 -2853.26 6 1800 0.63017 1134.305 -1718.95 7 1600 0.58349 933.5846 -785.368 8 1600 0.540269 864.4302 79.06208 Discounted payback period: 7 years + 785/ 864 = 7.91 years